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Revenue Sharing and Competitive Balance in a Dynamic Contest Model

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Author Info
Martin Grossmann () (Institute for Strategy and Business Economics, University of Zurich)
Helmut Dietl () (Institute for Strategy and Business Economics, University of Zurich)
Markus Lang () (Institute for Strategy and Business Economics, University of Zurich)

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Abstract

This paper presents a dynamic model of talent investments in a team sports league with an infinite time horizon. We show that the clubs' investment decisions and the effects of revenue sharing on competitive balance depend on the following three factors: (i) the cost function of talent investments, (ii) the clubs' market sizes, and (iii) the initial endowments of talent stock. We analyze how these factors interact in the transition to the steady state as well as in the steady state itself.

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File URL: http://www.isu.unizh.ch/static/ISU_WPS/70_ISU_full.pdf
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Publisher Info
Paper provided by University of Zurich, Institute for Strategy and Business Economics (ISU) in its series Working Papers with number 0070.

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Length: 28 pages
Date of creation: Sep 2007
Date of revision: May 2009
Handle: RePEc:iso:wpaper:0070

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Related research
Keywords: Contests; Sports Economics; Competitive Balance; Revenue Sharing;

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Find related papers by JEL classification:
L83 - Industrial Organization - - Industry Studies: Services - - - Sports; Gambling; Recreation; Tourism
D92 - Microeconomics - - Intertemporal Choice and Growth - - - Intertemporal Firm Choice and Growth, Investment, or Financing

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  1. Scott E. Atkinson & Linda R. Stanley & John Tschirhart, 1988. "Revenue Sharing as an Incentive in an Agency Problem: An example from the National Football League," RAND Journal of Economics, The RAND Corporation, vol. 19(1), pages 27-43, Spring. [Downloadable!] (restricted)
  2. Rodney Fort & James Quirk, 1995. "Cross-subsidization, Incentives, and Outcomes in Professional Team Sports Leagues," Journal of Economic Literature, American Economic Association, vol. 33(3), pages 1265-1299, September. [Downloadable!] (restricted)
  3. Stefan Szymanski & Stefan KÈsenne, 2004. "Competitive balance and gate revenue sharing in team sports," Journal of Industrial Economics, Blackwell Publishing, vol. 52(1), pages 165-177, 03. [Downloadable!] (restricted)
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  4. Peter Sloane, 2006. "Rottenberg and the Economics of Sport after 50 years: An Evaluation," Working Papers 0608, International Association of Sports Economists. [Downloadable!]
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  5. El-Hodiri, Mohamed & Quirk, James, 1971. "An Economic Model of a Professional Sports League," Journal of Political Economy, University of Chicago Press, vol. 79(6), pages 1302-19, Nov.-Dec.. [Downloadable!] (restricted)
  6. Daniel R. Marburger, 1997. "Gate Revenue Sharing And Luxury Taxes In Professional Sports," Contemporary Economic Policy, Western Economic Association International, vol. 15(2), pages 114-123, 04. [Downloadable!] (restricted)
  7. Blanchard, Olivier Jean & Kahn, Charles M, 1980. "The Solution of Linear Difference Models under Rational Expectations," Econometrica, Econometric Society, vol. 48(5), pages 1305-11, July. [Downloadable!] (restricted)
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